The pedigree of your hedge fund team is really important to the success of your hedge fund. In the following video, I explain how the pedigree of your hedge fund team can really have an impact on how successful your hedge fund is and the effectiveness of your capital raising.
Video Transcript/Summary: The strategies and tips provided within this video module include:
- Improving the pedigree of your team is important in order to attract new investors and additional talented professionals to the team, whose reputations provide value add.
- The pedigree of the team can help build a really strong board of advisers if they really believe in the portfolio management and executive team of your fund.
- Three ways of improving the pedigree of your team, which are not generally practiced by funds within the industry are (i) work with service providers and leverage their experience, (ii) include investing equity or profit sharing terms in the contracts offered to key personnel and (iii) build a board of strategic advisers or strategy team.
- When deciding on which service providers or business consultant to look, carefully consider their pedigree and business experience and position them as business partners in your marketing materials.
- Offering investing equity or profit sharing terms in the contract not only attracts greater talent but also ensures the person takes the role more seriously. Whilst a healthy salary is enticing, the promise of becoming a part owner after a certain period of time is what most experienced and talented personnel find particularly attractive.
- The best way to expand the pedigree of the team is to build a board of strategic advisers or strategy team. Multi faceted professionals in areas such as capital raising or technically should be sought out and each should have a minimum 7-10 years experience. If the board is built carefully, it reassures potential investors and should enable your fund to grow more efficiently.
Transcript for Hedge Fund Team
Hello, this is Richard Wilson and today we’re talking about the importance of pedigree to a hedge fund manager and to a fund business in general. First and foremost, the pedigree of your team can be the thing which attracts the attention of a new investor. It can attract additional talented professionals to join your team and it can help you build a really strong board of advisors if they really believe in the portfolio management team and the executive team of the hedge fund. Those people who have had extensive training and education, extensive experience in the past with well known names, with good reputations are going to be value adds to your team.
The one thing I wanted to get across in this video is that there’s ways of expanding the pedigree of your team in ways that are nontraditional and it can really help your fund gain an advantage. One way, is by bringing on consultants or service providers and business partners. Whenever you interview a service provider or a potential consultant, you should look at their pedigree and their experience and then look at how that compliments your team’s experience because nowadays investors are doing Due Diligence on the service providers of the hedge funds they’re invested in as much as they are the hedge fund.
And so it’s very important to look at the experience of the people who we’re working with at those partners as extensions of your own team’s experience. You can position it that way in your marketing materials, position it that way over the phone and really benefit from the reality that it is that way in the real world. You do benefit from having highly experienced professionals working at the service providers you work with.
Another way to increase your pedigree is to have some sort equity or profit sharing investing period of say 2, 4 or 6 years so that when you hire somebody new, you may not be able to pay them $600,000 a year right now but what you can’t do is offer them a healthy enough salary they can survive and then show them that after 4 years, in writing, in a contract that as long as they stay employed with the firm, they’d invest and they become part of equity owners or profit sharers in the firm. I think that lots of promises are made in the investment industry and aren’t kept unless they’re on paper and a contract.
And so it’s very important that that is done so the person takes it seriously. Especially someone who’s been around for a while and are not straight out of college or a graduate program, they’re going to want something in writing. So if you’re serious about it then show them you’re serious about it, and you can usually attract much more talented and experienced professionals by doing something such as that.
The next way which is probably the best way to expand your expertise quickly when you don’t have lots of money to hire another whole team of professional to make your team in a higher level of pedigree is to build a board of strategic advisors. And you can call this the board of advisors or strategic advisors or it could just be your strategy team. It doesn’t have to be a board of advisors which sometimes same as remote and unconnected to who your team really is. Strategic advisors could be experts in auditing, experts in capital raising, operations improvement, technology, they can be experts who are multifaceted so that as your firm grows they help you grow even quicker and help you solve problems and make decisions very wisely. These should be people in general with at least 7 to 10 years experience in their niche, if not more.
And I think that if you build this carefully you can have somebody in place that you would otherwise have to hire as a consultant anyways as you grow but it will also reassure investors that you have somebody who’s a total expert in risk management, in portfolio management and operational efficiencies and capital raising, all as part of your strategic team, an extension of your main team so that you can call upon them at any time and you can just grow more efficiently and quickly and using more risk management techniques along the way.
So those are three ideas you can use working with service providers and consultants and leveraging their pedigree, how to invest in equity or profit sharing terms in contract with potential employees for your fund or by building a strategic advisory team for your hedge fund.
You can improve the knowledge that your firm has to access and how quick your firm grows as a business. So I hope that these ideas help. They’re kind of the best practices that I’ve taken from many of the hedge funds that I worked with over the years. So I hope you enjoyed this video and we’ll speak again soon. Bye.
I hope that this video has given you a better understanding of why the pedigree of your hedge fund team is so important.
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